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Macklemore & Fifty Shades of Grey: the Democratization of Taste

The Internet is taking control of what we like away from the mysterious cabal of media executives

The Internet was created out of a focused – if not inconspicuous – desire to make it easier for a small group of government researchers to share data. In the years since, it has come to underpin much of our daily lives and is transforming even the most staid of human institutions. These profound and multifarious effects should not be a shock; at its core, the Internet is about access to information and today, everyone on the planet has remarkably more of it available to them than ever before. It’s for this reason that the words “democratization of” are being attached to almost anything today (Google is quick to suggests words as diverse as “technology”, “knowledge”, “culture” and “media”). Information asymmetry, after all, is one of the primary barriers to efficient markets. Underpinning this “democratization” is not just increased availability of information, but in many cases, disintermediation of the agencies, groups and individuals that usually distribute it. What I’d like to talk about today are two industries which have been silently, but massively disintermediated over the past year: music and publishing. I’ll then explain what this means for the future of these industries.

I have a lot of issues with award shows and chief among them is the central premise that anyone could be labeled the “Best”. The sheer volume of musicians worldwide makes the idea of determining who is best preposterous, if not conceited. The problem here, however, is distribution. Producing, marketing and releasing music is incredibly expensive and distribution channels and Zeitgeist can only support so many artists and albums at once. As a result, we have typically been exposed to only a fraction of the music produced – and primarily that of already established artists. This is why most brand-name artists seem to pick up Grammy nominations by the end of their career. Today, however, you need only two things to release your music to the world: a digital recorder and an Internet connection. In 2013, Macklemore became the first unsigned artist since 1994 to have a number-one single in the United States, “Thrift Shop”. The track is a grassroots success story born on social music sites such as SoundCloud and HypeM, rather than in state of the art studios and ad agency lofts. If “Thrift Shop” didn’t scare music labels, Macklemore quickly gave them a second reason to be. Three months later, he proved he was no “one hit wonder” with another chart topper: “Can’t Hold Us”.

Macklemore’s success doesn’t mean that music studios and labels don’t add value. Breaking out of obscurity – let alone to Macklemore’s newfound fame – remains exceedingly difficult. “Thrift Shop” was actually the fifth single from his album “The Heist”, which was released more than 18 months before the single appeared on the Billboard charts. But if obscure artists can have a multiplatinum record without label support, what must the Katy Perrys and Rolling Stones of the world be thinking? Artists typically receive less than 15% of the revenue from an iTunes sale (after Apple’s 30% distribution cut), with the rest going to the record label – and to a lesser extent, songwriters. The Rolling Stones are a large operation, to be sure, but they’re also a reliable and routine one. Rather than hand over 85% of their music sales to a record company, why can’t they pay salaried team to manage their concert tours, contracts, studio sessions and retail distribution (the last of which Macklemore hired Warner Music Group for)? Many of the more complex studio responsibilities, such as retail negotiations and managing manufacturing and fulfillment contracts, are quickly becoming anachronisms in the age of digital distribution and flat prices. Superstar label producers such as Dr. Luke and Max Martin (who have written a truly hyperbolic percentage of Billboard hits over the past decade) may also try to take “hit factories” directly to artists and promise apocryphal share of the proceeds. Without the support of label marketing machines, volumes may go down – but with multiples of more revenue left over, artists can afford topline losses. Labels aren’t irrelevant, but their models are no longer necessary for major artists.

The origin story of E.L. James’ Fifty Shades of Grey is almost as shocking as its storyline (or so I understand). It was first written as Twilight fan-fiction. The author, E.L. James, was seemingly unsatisfied with the restrained sexuality of the original (which was influenced by author Stephanie Meyer’s Mormon faith). James was not the only one to feel this way. The fan-fiction, then titled “Master of the Universe” went viral. The book continued to surge in popularity after James expunged its Twilight heritage, split it into three parts and released an eBook through an Australian online-only publisher. Hardcopies appeared shortly thereafter. A year and a half later, Amazon announced the first book had outsold the entire Harry Potter series combined in the UK and the series claimed the top four slots on the New York Times best sellers list (the 4th being the combined box-set) and broke the record for weeks at number one. James’ was able to achieve thislevel of success, awareness and readership with just word-of-mouth and a story that connected with its audience.

This direct-to-reader model is a dramatic departure from the intensive publishing process and hurdles that have historically prevented most writers from ever getting their work to the general public. C.S. Lewis was rejected 800 times before The Chronicles of Narnia was published (100M copies sold since) and Dr. Seuss was rejected by 27 different publishers before an editor gave him the break that ultimately spawned more than 125 million in book sales. Stephanie Meyer’s Twilight was denied by 14 consecutive agencies (250M copies). Not only is it impossible to imagine Fifty Shades of Grey being published before the Internet age, it’s unlikely James would have never written it in the first place. The rise of ebooks (which grew 45% in 2012, representing 20% of US book sales) will afford writers the chance to bring their material directly to readers. As with music, it will still be tough for unknowns to break out, but Fifty Shades of Grey has shown that publishing editors need not be the gatekeepers they’ve been since the 15th century. In addition, brand name writers such as John Grisham – who already hold the balance of power with their publishers – should be dramatically rethinking their arrangements.

Whether Macklemore or E.L. James “deserved” the success they’ve achieved is immaterial. By simplifying the value chain, the Internet is giving consumers more content than ever before – and democratizing its distribution. What we hear, read and like is no longer up to a small group of “expert” music and publishing executives in Los Angeles or New York. This powerful, though in-decline group will not cede this ground without a fight. Three months after Universal Music Group CEO Doug Morris defected to Sony Entertainment (title intact), he signed hit producer Max Martin to a five-year exclusive contract. Labels are no doubt scrambling similar deals to Ryan Lewis, who co-wrote and produced the entire of Macklemore’s “The Heist”, in order to simultaneously capitalize on his musical talents and neutralize his threat as an independent producer. Yet, Lewis is only the first of many more to come and there’s a comparatively low limit to the number of producers the major labels can support. As for Macklemore himself, it’s unclear what the major record companies have to offer him at this juncture.

Publishers may appear better equipped for Internet-led disruption. Writing for IBR a year ago, a colleague observed that “Just as online is a low-cost venture for individuals, it is also low cost for publishers. This route can serve as an incubator for titles that seem too risky to launch in a physical sense but may very well prove successful when given the chance.” This would appear to fit Fifty Shades of Grey style content well. However, digital publishing offers little beyond a watermarked page for those with an already viral book or established brand. Unlike their print counterparts, eBook success comes not from marketing budgets and flooded sales channels, but from tweets and “Top Charts”. Many authors may view publishers as a nice, but ultimately inessential go-to-market partner. As such, the major players should diversify into new, value added services for lower-volume authors, such as writing seminars, getaways and social media management.

Whether or not the Sonys and Penguins are fully disintermediated, the democratization of taste is expanding our societal oeuvre and driving a greater share of entertainment revenues back to the artists who created it. As Macklemore proudly declared in his second hit: “Labels out here / Now they can’t tell me nothing / We give that to the people / Spread it across the country”.

Liam Boluk is a Corporate Strategy Consultant focusing on the Technology and Media sectors. He is a graduate of Ivey's HBA program and an active kayaker, news junkie and concert goer.
He currently splits his time between NYC and San Francisco.

Ivey Business Review is written, designed, and managed by undergraduate students at the Ivey Business School and is the only publication of its kind in the country. IBR publishes two issues annually in December and April with content created exclusively by students and maintains an active blog, curated by the IBR Editorial Board, with contributions from students and young alumni.